PwC: Higher retail prices, low purchasing power impacting Nigeria MSMSEs

A recent survey conducted by PwC Nigeria has shed light on the challenges faced by Micro, Small, and Medium Enterprises (MSMEs) in Nigeria, particularly in the wake of the Covid-19 pandemic. The survey revealed that 50 per cent of MSMEs experienced a decrease in demand for their products due to the combination of high retail prices and low purchasing power of consumers in the country. Additionally, the report highlighted that most MSMEs are burdened by paying between 1 to 5 taxes, with Value Added Tax (VAT) being cited as the primary tax paid by 65 per cent of the businesses. Abiodun Kayode-Alli, Senior Manager of Tax and Regulatory Services at PwC Nigeria, discussed the findings of the report in an interview on CNBC Africa. Kayode-Alli emphasized the importance of understanding the key drivers and challenges facing MSMEs in Nigeria to guide policymakers in developing strategies to support the sector and achieve the goal of a $1 trillion economy by 2030. One of the significant challenges highlighted in the report is the reduction in demand for MSME products caused by the weakening purchasing power of consumers. The high production costs borne by businesses have forced many to increase prices, leading consumers to explore more affordable alternatives, thereby impacting the demand for MSME products. The report also pointed out issues such as limited access to finance, with a funding deficit of $32 billion identified by the International Financial Corporation, as well as inadequate critical infrastructure, particularly reliable electricity supply. The Covid-19 pandemic has brought about a shift in the operations of MSMEs, with many leveraging digital platforms to sustain and expand their businesses. Online platforms such as Zoom, Twitter, and Instagram have become essential tools for MSMEs to reach wider markets and drive efficiency. The rise of digital platforms presents opportunities for MSMEs to adapt to the changing business landscape and cater to evolving consumer preferences. Despite the potential offered by digitalization, accessing finance remains a major hurdle for MSMEs in Nigeria. Kayode-Alli noted that while some businesses resort to internal funding sources, such as plowed back profits or support from friends and family, high-interest rates in the traditional banking sector deter many from seeking external financing. The limited accessibility to government incentives and affordable financial support necessitates better data collection and fair distribution to ensure that all MSMEs can benefit from available resources. The regulatory environment in Nigeria poses another set of challenges for MSMEs, with bureaucratic hurdles and excessive taxes hindering business operations. The report indicated that some businesses face more than 11 different taxes, contributing to financial burdens and reducing profitability. Kayode-Alli called for a simplification of the tax system and a reduction in the number of taxes imposed on businesses to create a more conducive environment for MSME growth. In conclusion, the report underscores the urgent need for coordinated efforts between the government, MSMEs, and regulatory bodies to address the pressing issues faced by businesses in Nigeria. By streamlining regulatory policies, enhancing access to finance, and embracing digital solutions, MSMEs can navigate the challenges post-Covid and contribute to the economic transformation of the country.